Investing Strategy Smart Physicians Use to Optimize Their Wealth

1. The Investing Strategy Smart Physicians Use to Optimize Their Wealth

2. Meet our leadership team Our team has spent a combined 25+ years working in healthcare and technology. Our cofounder Dr. Graham Walker is the emergency medicine physician behind MDCalc and has firsthand experience with the challenges physicians are living through.

3. \An investment portfolio is a lot like a dinner plate. The most nutritious plate has a little bit of everything on it. Along the same lines, you want a diversified portfolio that holds different types of assets (stocks, bonds, real estate) across different sectors (technology, telecommunications, manufacturing). And, like food choices, investing preferences often change over time. When you’re young, you might be comfortable throwing money at speculative investments, like crypto or a specific company’s stock, which are risky but have the potential for high growth. But your palate should become more refined over the years, as you increasingly focus on stable, low-growth investments. Other factors besides age also influence the types of investments you make.

4. Periodic investment rebalancing You can choose to rebalance your portfolio at set intervals — typically quarterly or annually. At this time, you’ll review your investment portfolio’s performance in the past period, sell outperforming investments, and then put that money into other areas to achieve your target asset allocation. Case study: Dr. Susie rebalances her portfolio every June. Last June, she settled on the following target asset allocation: 50% stocks, 40% bonds, and 10% cash. Before rebalancing this June, her asset allocation is 65% stocks, 30% bonds, and 5% cash. She’ll rebalance by selling a considerable amount of stock, purchasing bonds, and keeping some cash.

5. Tolerance threshold investment rebalancing Some investors only rebalance their portfolios when their portfolio’s asset allocation has strayed outside a specified threshold. Unlike the periodic rebalancing strategy, the tolerance threshold strategy requires constant investment performance monitoring, which is onerous, if not impractical, for busy physicians. Case study: Dr. John has a target asset allocation of 50% domestic stocks, 20% international stocks, 20% bonds, and 10% cash. He sets a five-percentage-point fixed threshold for rebalancing, which means that if any asset’s allocation moves by five percentage points, he’ll rebalance the entire portfolio.  Hybrid investment rebalancing • The final option is perhaps the happy medium of rebalancing strategies. A hybrid rebalancing approach involves periodically reviewing your asset allocation and only making changes when it’s shifted beyond a set threshold. • Case study: Dr. Melissa’s target asset allocation is 70% stocks, 20% bonds, and 10% cash. She reviews her investments quarterly and only rebalances when any asset’s allocation changes by more than 10% (a relative threshold). 

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